NEW YORK (AP) -- Investors fixated on the faltering economy brushed off the type of merger news that normally starts rallies.
Wall Street fell more than 1 percent Monday as uneasiness about the economy eclipsed a bounce in troubled financial stocks and news of a big drug company merger. Stocks rose in the early going but turned lower in a now familiar pattern where short-lived bursts of optimism give way to concerns about the country's economic woes.
Financial stocks rose on a news report that Bank of America Corp. could raise capital in the private sector. Shares of major banks have been pummeled to multiyear lows amid growing concern that they don't have enough cash to cover future losses despite multiple government rescues.
"Any bank right now that can raise money in the private sector, that is a major positive for the market," said Quincy Krosby, chief investment strategist at The Hartford. "It's another way to raise capital rather than the government infusing capital into the banks."
But remarks from billionaire investor Warren Buffett added to an overall mood of dejection. He said during an appearance on CNBC that the economy had "fallen off a cliff" over the past six months.
Investors even wrote off rare dealmaking as moves borne more of necessity than opportunity as drugmakers Merck & Co. and Schering-Plough announced plans to combine in a $41 billion deal.
"Any type of news we get, the market is just skeptical," said Jon Biele, head of capital markets at Cowen & Co. "There is nothing in the near term that is going to ratchet us to a different higher level."
In the past few weeks, even when there has been better-than-expected data, the market has quickly surrendered any gains. Investors would rather dump stocks than risk place bets on companies that don't have a sense of how they'll fare this year.
The market is also skeptical of Washington's efforts to help the financial industry and the overall economy with spending and tax cuts. And so the Dow Jones industrials haven't managed to put together two consecutive winning sessions since February 5 to 6.
The Dow fell 79.89, or 1.2 percent, to 6,547.05.
The Standard & Poor's 500 index fell 6.85, or 1 percent, to 676.53, while the Nasdaq composite index fell 25.21, or 2 percent, to 1,268.64.
The Russell 2000 index of smaller companies fell 7.79, or 2.2 percent, to 343.26.
About five stocks fell for every two that rose on the New York Stock Exchange, where consolidated volume came to 6.21 billion shares, compared with 7.21 billion shares on Friday.
Both the Dow and the S&P 500 have fallen more than 25 percent this year. The Dow is at its lowest level since the spring of 1997, and the S&P 500 is at its lowest point since the fall of 1996. The Nasdaq, meanwhile, is at a six-year low.
"There is really not very much for the market to sink its teeth into," said Steve Sachs, director of trading at Rockville, Marlyand-based Rydex Investments.
That includes a lack of solid evidence that a recovery might be starting, especially with job losses of more than half a million each month. It's also widely expected that big financial companies will still need bailouts above the hundreds of billions of dollars they've already received.
Consumer and business confidence remain at drastically low levels, and the daily headlines about the economy, the stock market and the financial industry are making matters worse. Although many traders contend the selling is overdone, investors are still hesitant to look for bargains.
Meanwhile, the string of losing days is costing investors. The Dow Jones Wilshire 5000 index, which reflects nearly all stocks traded in America, is down 24.5 percent this year. That equates to a paper loss of $2.7 trillion.
Investors were unimpressed with Merck's offer for Schering-Plough. Merck has offered Schering-Plough shareholders $10.50 in cash and just over half of one Merck share for each of their shares. The price represents a 34 percent premium to Schering-Plough's closing stock price on Friday. A combination between the two companies had long been speculated.
Merck dropped $1.75, or 7.7 percent, to $20.99, while Schering-Plough rose $2.50, or 14.2 percent, to $20.13.
Genentech rose $1.77, or 2 percent, to $92.63 after The Wall Street Journal reported the company is close to striking a deal for a $95-per-share sale to Switzerland's Roche, the company's cancer drug partner. On Friday, Roche increased its bid to $93 per share, or $45.7 billion, after its $86.50-per-share offer failed to gain shareholder support. The companies have been going back and forth since July, when Genentech rejected an $89-per-share bid as too low.
Among financials, Bank of America jumped 61 cents, or 19.4 percent, to $3.75. Wells Fargo & Co. rose $1.36, or 15.8 percent, to $9.97.
General Electric Co. rose after a spokesman that its GE Capital lending arm is selling debt under a federal liquidity program. The company, which often trades in line with financial stocks, rose 35 cents, or 5 percent, to $7.41.
Capital One Financial Corp. became the latest bank to slash its dividend, following JPMorgan Chase & Co., Wells Fargo and others. Capital One said it will reduce its payout by 87 percent to 5 cents to help preserve capital. Capital One rose 42 cents, or 5 percent, to $8.73, after falling to $7.80, a new 52-week low.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 2.88 percent from 2.89 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.23 percent from 0.18 percent late Friday.
The dollar mostly rose against other major currencies, while gold prices fell.
Light, sweet crude for April delivery rose $1.55 to settle at $47.07 a barrel on the New York Mercantile Exchange.
Overseas markets ended mixed after the World Bank forecast that the global economy will shrink this year for the first time since World War II. Japan's Nikkei stock average fell 1.2 percent, while Hong Kong's Hang Seng index dropped 4.8 percent. Britain's FTSE 100 rose 0.3 percent, Germany's DAX index rose 0.7 percent, and France's CAC-40 fell 0.6 percent.